New commercial approach to rail can overcome the handicap of history

In dismissing rail as "not having paid its way for generations - if ever",the Herald (Editorial 20 May) invites readers to assume that our plan is a continuation of past approaches.

The Government, in announcing investment in KiwiRail, was effectively signalling it has heeded the lessons of the past. It has accepted KiwiRail's long term plan for rail's future that is focused on achieving commercial success by meeting customer needs.

Rail's long and colourful history helps us to understand why it is currently struggling to provide customers with competitive services and why investment has been so necessary.

The business has barely had only enough capital for many years to hold it together. This has resulted in a decline in the asset and rail's ability to deliver reliable and competitive services.

Pulling trains with 30 year plus locomotives is like running a trucking company with HQ Holdens - cute and quirky but far from effective.

Put them on the equivalent of a winding, single-lane road with few passing lanes and a surface that is patched and potholed,and it is easy to see why rail transit times from Auckland to Wellington are now four and a half hours slower than road. Fifteen or so years ago, they were on a par.

It has been a strategy of just enough capital to fail and it is very clearly why rail's market share has been eroded.

It's legitimate to ask, why not leave freight to road transport if it's that much faster?

It's the customers who provide the answer. They have signalled strongly they would support rail if they are satisfied that it is relevant to their needs and their business.

Why? Mostly because for some types of freight, rail provides a cost effective element in their overall transport solutions.

For those worried about carbon footprints, it can offer significant environmental benefits too.

Some argue rail's low share of overall freight movement makes it largely irrelevant. Try telling that to the producers of the third of New Zealand's export products we move.

And with freight traffic expected to almost double over the next 30 years, it will have to play its part in moving these goods around the country.

In deciding to invest, the Government has signalled very clearly that it expects KiwiRail to operate commercially

The vital logic behind this is that by investing in those parts of the business that are commercially viable, rail can stand on its own feet.

At its most simple, the plan focuses on unlocking potential revenue on the backbone of our network by improving the rail and ferry infrastructure of our main trunk route running the length of the two islands. We will then have the opportunity to reclaim freight on many of the sectors between Auckland and Christchurch.

Our share of the containerised freight that travels across Cook Straight has declined from 60 percent in 1995 to 18 percent today.

This focus on our backbone strengthens the whole network and ensures options for all our customers - passenger and freight today and as their needs change in future years.

Of course, there is wider investment required across the network. We must renew our locomotive and wagon fleets; invest in other parts of the network to ensure our capability is relevant to our customer in those areas; and invest in our processes, systems and tools to maximise the productivity of our team so we are as competitive as possible.

Implementing the plan will be a challenge. We have to buy more than anyone thought possible with the money we receive and we need the support of all the stakeholders. But the turnaround plan is more than just an infrastructure shopping list. It focuses KiwiRail on the parts of its business that are truly commercial and separates out the parts that aren't.

Predictably, reaction to the investment announcement centred not on freight but on the possible closure of minor lines and the possibility that commuters in Auckland and Wellington could pay more for their journeys.

We've identified the minor lines that currently carry little or no traffic, but require significant investment just to maintain current operations - let alone improve transit times . We've said that we'll consult with customers, communities and staff but if an anchor customer can't be found, and they remain unprofitable we'll recommend mothballing and possible later closure.

That's being commercial.

In Auckland and Wellington, we are identifying the costs we incur in providing the infrastructure commuter trains use. We will then be making these more transparent so that they can be funded correctly through the various channels for these costs.

In both cities, the infrastructure has improved dramatically in recent years or is being improved and in Auckland services have increased in response. The ongoing costs do not yet reflect this investment.

We all expect KiwiRail to be commercial and profitable, it is reasonable that these costs be understood and funded appropriately.

This step by government is not about accepting that we are stuck with rail, like it or not. It is a positive step to make sure there is enough investment for success, not just enough to fail. Are there risks in our plan? Of course - any 10 year plan has risks and reach. Can we deliver it? Absolutely!